Modern Construction Co.P.Ltd., Ahmedabad V. The Dy.CIT.,Circle-4, Ahmedabad

ITA 264/AHD/2008

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68007 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 22-10-2013
• Assessment Year: 2002-2003
• Appeal Filed On: 23-01-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: O P BATHEJA
• Assessee Lawyers: M G PATEL
• Keywords: Retrospective amendment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER ITA NO.264/AHD/2008 A.Y. 2002-03 MODERN CONSTRUCTION CO. P. LTD., 5 TH FLOOR, H.K. HOUSE ASHRAM ROAD AHMEDABAD. PAN: AAACM 5823E VS DCIT CIRCLE-4, AHMEDABAD. (APPELLANT) (RESPONDENT) ITA NO.572/AHD/2008 AND 950/AHD/2010 A.YS. 2002-03 DCIT CIRCLE-4, AHMEDABAD. VS MODERN CONSTRUCTION CO. P. LTD., 5 TH FLOOR, H.K. HOUSE ASHRAM ROAD AHMEDABAD. PAN: AAACM 5823E (APPELLANT) (RESPONDENT) REVENUE BY : S/SHRI O.P. BATHEJA, SR.D.R. ASSESSEE(S) BY : SHRI M.G. PATEL, A.R. / DATE OF HEARING : 22/10/2013 / DATE OF PRONOUNCEMENT: 29/11/2013 / O R D E R PER SHRI MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER FOR A.Y. 2002-03, THE ASSESSEE AS WELL AS REVENUE B OTH ARE IN APPEAL ARISING FROM THE ORDER OF LEARNED CIT(A)-VII I, AHMEDABAD, DATED 26.11.2007. GROUNDS RAISED BY THE ASSESSEE ARE REPR ODUCED BELOW: THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-VI II, AHMEDABAD HAS ERRED IN LAW AND ON FACTS OF THE CASE BY HOLDING TH AT DEDUCTION U/S. 80IA ITA NO.264, 572/ AHD/2008 AND ITA NO.950/AHD/2010 MODERN CONSTRUCTION CO. P. LT.D VS. DCIT AHMEDABAD . FOR A.YS. 2002-03 - 2 - CANNOT BE ALLOWED ON INTEREST INCOME AND ON MISCELL ANEOUS RECEIPTS AS THE SAME ARE NOT DERIVED FROM INDUSTRIAL UNDERTAKING AN D ACCORDINGLY HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER I N NOT ALLOWING DEDUCTION U/S. 80IA ON INTEREST INCOME OF RS.25,56,137/- AND MISCELLANEOUS RECEIPTS OF RS.2,39,420/- 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -VIII, AHMEDABAD HAS ALSO ERRED IN NOT CONSIDERING THE CONTENTION OF THE APPELLANT THAT IN RESPECT OF INTEREST INCOME, THE SAME HAS TO BE NET OFF AGAINST THE INTEREST PAYMENT AND IN THAT CASE, THERE IS NET DEBIT OF INTEREST OF RS.2,1 9,764/- 3. THE APPELLANT PRAYS TO ALLOW DEDUCTION U/S 80IA( 4) OF THE INCOME TAX ACT, 1961 AS CLAIMED BY THE APPELLANT. 2. FOR A.Y. 2002-03, REVENUE HAS RAISED THE GROUNDS AS UNDER: THE LD. CIT(A) ERRED IN LAW AND ON THE FACTS OF TH E CASE IN HOLDING THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S. 80IA(4). 2.1 SINCE THE GROUNDS OF BOTH THE SIDES ARE CONNECT ED WITH EACH OTHER, THEREFORE, HEREBY DECIDED BY THIS COMMON ORDER. 3. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143(3) R.W.S. 147 FOR AYS 2002-03 DATED 30.11.2006 WERE THAT THE ASSESSEE-COMPANY IS ENGAGED IN THE BUSINESS OF CONSTRUCTION. FOR AY 2002-03 ASSESSEE HAS CLAIMED A DEDUCTION U/S.80IA O F RS.39,94,336/-. IN SUPPORT ASSESSEE HAS FURNISHED FORM 10CCB ALONG WITH THE RETURN OF INCOME. THE BASIS OF DEDUCTION U/S.80IA, AS PER ASS ESSEE, IS THAT AN ENTERPRISE IS REQUIRED TO CARRY ON THE BUSINESS OF (I) DEVELOPING OR (II) OPERATING AND MAINTAINING OR (III) DEVELOPING, OPER ATING AND MAINTAINING ANY INFRASTRUCTURE FACILITY U/S. 80IA(4) OF IT ACT. THE ASSESSEE HAS ALSO CLAIMED THAT IT WAS DULY CERTIFIED AS PER THE AUDIT REPORT THAT THE ASSESSEE-COMPANY WAS ENGAGED IN THE BUSINESS OF CON STRUCTION AND ENGINEERING. HOWEVER, AS PER AO THE ASSESSEE HAS A CTED ONLY AS A ITA NO.264, 572/ AHD/2008 AND ITA NO.950/AHD/2010 MODERN CONSTRUCTION CO. P. LT.D VS. DCIT AHMEDABAD . FOR A.YS. 2002-03 - 3 - CONTRACTOR AND EXECUTED THE WORK FOR OUTSIDERS. AS PER AO, THE ASSESSEE DID NOT OWN ANY INFRASTRUCTURAL PROJECT. THE ASS ESSEE HAS EXPLAINED VIDE CERTAIN WRITTEN SUBMISSIONS THAT DURING THE YE AR UNDER CONSIDERATION, IT HAD CARRIED OUT DEVELOPMENT WORK IN RESPECT OF WATER SUPPLY AND SEWERAGE SYSTEM OF THE FOLLOWING AUTHORITIES:- [1] AHMEDABAD MUNICIPAL CORPORATION NARODA SITE SEWERAGE WORK [2] GUJARAT WATER SUPPLY AND SEWERAGE BOARD [I] DATA [II] MAMNAR & KHAROLI [3] JAMNAGAR MUNICIPAL CORPORATION DRINKING WATE R PROJECT. [4] VASNA M.S. PIPE MANUFACTURING FOR DRINKING WA TER PROJECT OF GWSSB. 3.2. THE ASSESSEE HAS FURNISHED THE WORK ORDER OR T HE AGREEMENT EXECUTED WITH THE AUTHORITIES REFERRED ABOVE. IT WA S REITERATED THAT THE INFRASTRUCTURE FACILITY INCLUDED THE WORK OF WATE R SUPPLY AND SEWERAGE SYSTEM. ON THAT BASIS, THE ASSESSEE HAS PLEADED THAT IT WAS ENTITLED FOR THE CLAIM OF DEDUCTION U/S.80IA. THE AO WANTED TO K NOW THE INVOLVEMENT OF THE ASSESSEES OWN FUNDS FOR THE DEV ELOPMENT OF INFRASTRUCTURE FACILITIES. AO HAS NOTED THAT THE W ORK WAS ASSIGNED TO THE ASSESSEE AS A CONTRACTOR ONLY. THE AO HAS FURNISHE D THE NAME OF THE PROJECT, NAME OF THE SITE AND THE AMOUNT OF THE CON TRACT WHICH WAS GIVEN TO THE ASSESSEE IN THE FOLLOWING MANNER:- SITE NAME NAME OF THE PROJECT AMOUNT (RS.) VASNA SITE M.S.PIPE MANUFACTURES FOR GWSSB DRINKING WATER SUPPLY SCHEME 24,79,535/- ITA NO.264, 572/ AHD/2008 AND ITA NO.950/AHD/2010 MODERN CONSTRUCTION CO. P. LT.D VS. DCIT AHMEDABAD . FOR A.YS. 2002-03 - 4 - NARODA SITE RCC DRAINAGE PIPE LINE OF SEWERAGE SYSTEM IN AHMEDABAD MUNICIPAL CORPORATION 81,09,581/- DANTA SITE M.S. PIPE LINE DRINKING WATER SUPPLY SCHEME FOR GWSSB, PAKANPUR, (REGIONAL WATER SUPPLY SCHEME FOR VADGAM/DANTA TALUKA) 45,41,654/- JAMNAGAR SITE CONSTRUCTION OF E.S.R./G.S.R. OF DRINKING WATER FOR JAMNAGAR MUNICIPAL CORPORATION 2,35,85,480/- MAMNNAR KHEROLI SITE M.S.PIPE LINE OF DRINKING WATER SUPPLY SCHEME FOR HWSSB, ANAND. [REGIONAL WATER SUPPLY SCHEME FOR NAMMNAR & KHEROLI] 7,00,15,787/- 3.3. THE AO HAS FORMED AN OPINION THAT THE WORK WAS EXECUTED ON BEHALF OF THE OWNER, I.E. THE AUTHORITIES GIVEN THE CONTRACT. THE ASSESSEE HAS NOT WORKED AS A DEVELOPER BECAUSE FOR PROVIDING INFRASTRUCTURE FACILITIES THE ASSESSEE HAS NOT USED ITS OWN FUNDS. THE ASSESSEE HAS RAISED BILLS FOR THE WORK CARRIED OUT AND RECEIVED THE PAY MENT FROM THOSE AUTHORITIES. AS PER AO, THE ASSESSEE HAD NEITHER OP ERATING NOR MAINTAINING THOSE INFRASTRUCTURE FACILITIES. THE AS SESSEE HAD ONLY EXECUTED THE WORK CONTRACT AND THERE WAS NO OPERA TION OR MAINTENANCE ON THE PART OF THE ASSESSEE. AS PER AO, SECTION 80I A PROVIDES DEDUCTION FROM THE PROFITS AND GAINS OF AN ENTERPRISE CARRYIN G ON THE BUSINESS OF DEVELOPING OR OPERATING AND MAINTAINING OR DEVEL OPING, OPERATING ITA NO.264, 572/ AHD/2008 AND ITA NO.950/AHD/2010 MODERN CONSTRUCTION CO. P. LT.D VS. DCIT AHMEDABAD . FOR A.YS. 2002-03 - 5 - AND MAINTAINING ANY INFRASTRUCTURE FACILITY. IN HIS OPINION, THE ASSESSEE HAS NOT FULFILLED ALL THE CONDITIONS SPECIFIED U/S. 80IA(4) OF IT ACT. BY PLACING RELIANCE ON THE FOLLOWING DECISIONS, THE CL AIM OF DEDUCTION WAS DISALLOWED. I) COMMISSIONER OF INCOME-TAX VS. N.C.BUDHARAJA & COMPANY 204 ITR 412 (SC). II) CIT VS. MAGASKA INTERNATIONAL (INDIA) PVT.LT D. 254 ITR 283 (DEL). III) CIT VS. GEOTECH FOUNDATION & CONSTRUCTIONS 24 1 ITR 90. IV) BADSHAH CONSTRUCTION CO. (PVT.) LTD. VS. CIT 22 3 ITR 512 (MP). 3.4. THE MATTER WAS CARRIED BEFORE THE FIRST APPELL ATE AUTHORITY. IT WAS REITERATED BEFORE LD.CIT(A) THAT THE ASSESSEE HAS P ROVIDED INFRASTRUCTURE FACILITIES OF WATER SUPPLY AND SEWERAGE SYSTEM, THE REFORE ENTITLED FOR DEDUCTION U/S.80IA(4). THE ASSESSEE HAS PLACED RELI ANCE ON PATEL ENGINEERING LTD., 94 ITD 411 (BOM.). IN A BRIEF AND CRYPTIC MANNER, LD.CIT(A) HAS HELD AS UNDER:- 2.2. I HAVE CONSIDERED THE SUBMISSIONS OF THE A.R. CAREFULLY AND ALSO THE OBSERVATION OF THE A.O. I FIND THAT THE APPELLANT HAS CARRIED OUT DEVELOPMENT WORK IN RESPECT OF WATER SUPPLY AND SEWERAGE SYSTEM FOR GOVERNMENT/SEMI GOVERNMENT/LOCAL AUTHORITIES LIKE AHMEDABAD MUNICIP AL CORPORATION, GUJARAT WATER SUPPLY & SEWERAGE BOARD, JAMNAGAR MUN ICIPAL CORPORATION. THE INFRASTRUCTURE FACILITIES DEFINED IN SECTION 80 IA(4) INCLUDE WORK OF WATER SUPPLY AND SEWERAGE SYSTEM AND THE APPELLANT BEING THE MAIN CONTRACTOR IS ELIGIBLE FOR DEDUCTION U/S.80-IA(4) THE FACTS OF T HE APPELLANTS CASE ARE IDENTICAL WITH THAT OF PATEL ENGINEERING LTD. DECID ED BY ITAT BOMBAY AND REPORTED IN 94 ITD 411. IN VIEW OF THE ABOVE FACTS AND THE CASE LAW IT IS NOT REQUIRED THAT INFRASTRUCTURE FACILITY SHOULD BE OWN ED BY THE APPELLANT. AS PER THE SECTION 80IA(4), ANY ENTERPRISE CARRYING ON BUS INESS OF DEVELOPING OPERATING AND MAINTAINING ANY INFRASTRUCTURE FACILI TY SHOULD BE OWNED BY THE COMPANY REGISTERED IN INDIA I.E. THE ENTERPRISE CAR RYING OUT THE WORK SHOULD BE OWNED BY THE COMPANY REGISTERED IN INDIA. THIS CONDITION IS SATISFIED, AS THE APPELLANT IS A COMPANY WHICH OWNS THE ENTERPRIS E CARRYING ON THE BUSINESS OF DEVELOPING OR OPERATING AND MAINTAINING INFRASTRUCTURE FACILITY. THEREFORE, THE APPELLANT IS ELIGIBLE FOR DEDUCTION U/S.80IA(4) OF THE I.T. ACT. ITA NO.264, 572/ AHD/2008 AND ITA NO.950/AHD/2010 MODERN CONSTRUCTION CO. P. LT.D VS. DCIT AHMEDABAD . FOR A.YS. 2002-03 - 6 - THE ASSESSING OFFICER IS THEREFORE DIRECTED TO ALLO W DEDUCTION U/S.80IA(4) TO THE APPELLANT SUBJECT TO FINDING IN SUBSEQUENT GROU ND. 4. FROM THE SIDE OF THE REVENUE, LD. SR.D.R. O.P. B ATHEJA APPEARED AND PLACED RELIANCE ON THE FINDINGS OF THE AO. HE HAS ARGUED THAT THE PROVISIONS OF SECTION 80IA(4) PRESCRIBES THAT THE B ENEFIT CAN BE GIVEN TO AN ENTERPRISE IF CARRYING ON THE BUSINESS OF DEVELO PING AND OPERATING AND MAINTAINING AN SPECIFIED INFRASTRUCTURE FACILITIES. IN THE PRESENT CASE, IT HAS NOT BEEN DEMONSTRATED BY THE ASSESSEE WHETHER T HE ASSESSEE HAS EITHER OPERATED OR MAINTAINED OR BOTH THE INFRASTRU CTURE FACILITY. IT IS ALSO NOT CLEAR THAT HOW LD.CIT(A) HAS HELD THAT THE INFR ASTRUCTURE FACILITY HAS ACTUALLY BEEN OWNED BY THE ASSESSEE. THE ASSESSEE HAS MERELY ACTED AS A CIVIL CONTRACTOR BECAUSE THE RUNNING BILLS WERE RAI SED AND IN TURN THE GOVERNMENT AUTHORITIES HAVE MADE THE PAYMENT. IT W AS PURELY AN AGREEMENT OF A CONTRACTOR, HENCE IT WAS NOT ALLOWAB LE. LD. DR HAS PLACED RELIANCE ON B.T.PATIL & SONS BELGAUM CONSTRUCTION P VT.LTD. VS. ASST.CIT 126 TTJ 577 (T.M.)[MUM.]. 4. ON THE OTHER HAND, FROM THE SIDE OF THE ASSESSEE , LD.AR MR. M.G. PATEL ARGUED THAT THE INFRASTRUCTURE FACILITIES ARE PROVIDED BY THE ASSESSEE, THEREFORE ENTITLED FOR CLAIM OF DEDUCTION U/S.80IA( 4). AS PER LD.AR THE MATTER IS COVERED BY CIT VS. ABG HEAVY INDUSTRIES L TD. 322 ITR 323 (BOM.). THE LD.AR HAS ALSO PLACED RELIANCE ON FOLLO WING ORDERS OF THE TRIBUNAL:- SL.NO(S) IN THE CASE OF.. IN ITA NO(S).. 1. LAXMI CIVIL ENGG.P.LTD. ITAT A BENCH PUNE IN I TA NOS.766/PN/09, 254/PN/08, 431/PN/07 & 435/PN/07 FOR AYS 2006-07, 2005-06, 2003- ITA NO.264, 572/ AHD/2008 AND ITA NO.950/AHD/2010 MODERN CONSTRUCTION CO. P. LT.D VS. DCIT AHMEDABAD . FOR A.YS. 2002-03 - 7 - 04 & 2004-05 ORDER DATED 8.6.2011 2. M/S.OM METALS INFRAPROJECTS LTD. VS. THE CIT ITAT A BENCH JAIPUR IN ITA NOS.722 & 732/JP/2008 FOR AYS 2003-04 & 2004-05 ORDER DATED 31/12/2008 3. OM METALS INFRAPROJECTS LTD. VS. ADDLCIT ITAT A BENCH JAIPUR IN ITA NO.911/JP/2010 FOR A.Y. 2007-08 ORDER DATED 05/08/2011 6. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES, IT IS PERTINENT TO MENTION AT THE OUTSET THAT THE REVENUE AUTHORITIES HAVE NOT ANALYZED THE FACTS OF THE CASE PROPERLY SO AS TO DETERMINE WHETH ER THE CONDITIONS PRESCRIBED U/S.80IA(4) HAVE BEEN COMPLIED WITH BY T HIS ASSESSEE OR NOT. SECTION 80IA(4) APPLIES TO AN ENTERPRISE CARRYING ON THE BUSINESS OF - (I) DEVELOPING OR (II) OPERATING AND MAINTAINING OR (III) DEVELOPING, OPERATING AND MAINTAINING ANY INF RASTRUCTURE FACILITY 6.1. AS PER THE EXPLANATION ANNEXED TO THIS SECTION INFRASTRUCTURE FACILITY MEANS (C) A WATER SUPPLY PROJECT, WATER TREATMENT SYSTE M, IRRIGATION PROJECT, SANITATION AND SEWERAGE SYSTEM OR SOLID WA STER MANAGEMENT SYSTEM: UNDISPUTEDLY, THE PROJECT IN QUESTION FALLS WITHIN THE CATEGORY OF INFRASTRUCTURE FACILITY AS PRESCRIBED UNDER THE A CT. HOWEVER, THE ASSESSEE HAS TO FULFILL CERTAIN OTHER CONDITIONS; N AMELY, (A) THE ENTERPRISE CARRYING ON THE BUSINESS IS OWNED BY A COMPANY REGI STERED IN INDIA OR BY A CONSORTIUM OF SUCH COMPANIES AND (B) SUCH ENTERPR ISE HAS ENTERED INTO AN AGREEMENT WITH THE CENTRAL GOVERNMENT OR STATEME NT GOVERNMENT OR ITA NO.264, 572/ AHD/2008 AND ITA NO.950/AHD/2010 MODERN CONSTRUCTION CO. P. LT.D VS. DCIT AHMEDABAD . FOR A.YS. 2002-03 - 8 - LOCAL AUTHORITY, (C) THE AGREEMENT IS IN RESPECT OF DEVELOPING, OPERATING AND MAINTENANCE OF SUCH INFRASTRUCTURE FACILITY, AN D (D) THE ENTERPRISE STARTS OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY ON OR AFTER 1 ST DAY OF APRIL-1995. IT IS IMPORTANT TO NOTE THAT AN EXPLANATION WAS INSERTED BY THE FINANCE ACT, 2007 WITH RETROSPECTIV E EFFECT FROM 1.4.2000 WHICH READ AS UNDER:- EXPLANATION.- FOR THE REMOVAL OF DOUBTS, IT IS HE REBY DECLARED THAT NOTHING CONTAINED IN THIS SECTION SHALL APPLY TO A PERSON W HO EXECUTES A WORKS CONTRACT ENTERED INTO WITH THE UNDERTAKING OR ENTER PRISE, AS THE CASE MAY BE. 6.2. THIS EXPLANATION WAS THEN SUBSTITUTED BY FINAN CE (NO.2) ACT, 2009 WITH RETROSPECTIVE EFFECTIVE FROM 1.4.2000 AND AT PRESENT IT READS AS UNDER:- [EXPLANATION. FOR THE REMOVAL OF DOUBTS, IT IS H EREBY DECLARED THAT NOTHING CONTAINED IN THIS SECTION SHALL APPLY IN RELATION T O A BUSINESS REFERRED TO IN SUB-SECTION (4) WHICH IS IN THE NATURE OF A WORKS C ONTRACT AWARDED BY ANY PERSON (INCLUDING THE CENTRAL OR STATE GOVERNMENT) AND EXECUTED BY THE UNDERTAKING OR ENTERPRISE REFERRED TO IN SUB-SECTIO N(1)]. FROM THE READING OF THE EXPLANATION, NOW IT IS CLE AR THAT THE BUSINESS REFERRED TO IN SUB-SECTION (4) OF SECTION 80IA SHOULD NOT BE IN THE NATURE OF WORKS CONTRACT AWARDED BY ANY STATE OR CENTRAL GOVERNMENT. IN THIS CONNECTION, THE MAIN ALLEGATIO N OF THE AO WAS THAT THE NATURE OF WORK AND THE NATURE OF CLAUSES OF AGR EEMENT HAVE INDICATED THAT THE WORK ASSIGNED TO THIS ASSESSEE WAS NOTHING BUT WORKS CONTRACT. NEVERTHELESS, THIS CONTROVERSY CAN BE SETTLED BY CA REFULLY PERUSING THE CBDT CIRCULAR NO.717 DATED 14.08.1995 REPORTED AS 2 15 ITR (STATUTE) 70, 91, DULY CONSIDERED BY HONBLE BOMBAY HIGH COUR T IN THE CASE OF ABG HEAVY INDUSTRIES LTD. 322 ITR 323 (BOM.), FOR READY REFERENCE RELEVANT PARAGRAPHS REPRODUCED BELOW:- FIVE-YEAR TAX HOLIDAY FOR INFRASTRUCTURE DEVELOPME NT: 34.1 ITA NO.264, 572/ AHD/2008 AND ITA NO.950/AHD/2010 MODERN CONSTRUCTION CO. P. LT.D VS. DCIT AHMEDABAD . FOR A.YS. 2002-03 - 9 - 34.2. INDUSTRIAL MODERNIZATION REQUIRES A MASSIVE EXPANSION OF, AND QUALITATIVE IMPROVEMENT IN INFRASTRUCTURE. OUR COU NTRY IS VERY DEFICIENT IN INFRASTRUCTURE SUCH AS EXPRESSWAYS, HIGHWAYS, AIRPO RTS, PORTS AND RAPID URBAN RAIL TRANSPORT SYSTEMS. ADDITIONAL RESOURCES ARE NE EDED TO FULFIL THE REQUIREMENTS OF THE COUNTRY WITHIN A REASONABLE TIM E FRAME. IN MANY COUNTRIES THE BOT (BUILD OPERATE TRANSFER) OR THE B OOT (BUILD OWN OPERATE TRANSFER) CONCEPTS HAVE BEEN UTILIZED FOR DEVELOPIN G NEW INFRASTRUCTURE. 34.3. APPLYING COMMERCIAL PRINCIPLES IN THE OPERATI ON OF INFRASTRUCTURE FACILITIES CAN PROVIDE BOTH MANAGERIAL AND FINANCIA L EFFICIENCY. IN VIEW OF THIS A TEN-YEAR CONCESSION INCLUDING A FIVE-YEAR TAX HOL IDAY HAS BEEN ALLOWED FOR ANY ENTERPRISE WHICH DEVELOPS, MAINTAINS AND OPERAT ES ANY NEW INFRASTRUCTURE FACILITY SUCH AS ROADS, HIGHWAYS, EXPRESSWAYS, BRID GES, AIRPORTS, PORTS AND RAIL SYSTEMS OR ANY OTHER PUBLIC FACILITY OF SIMILA R NATURE AS MAY BE NOTIFIED BY THE BOARD ON BOT OR BOOT OR SIMILAR OTHER BASIS (WH ERE THERE IS AN ULTIMATE TRANSFER OF THE FACILITY TO A GOVERNMENT OR PUBLIC AUTHORITY). THE ENTERPRISE HAS TO ENTER INTO AN AGREEMENT WITH THE CENTRAL OR STATE GOVERNMENT OR A LOCAL AUTHORITY OR ANY OTHER STATUTORY AUTHORITY FO R THIS PURPOSE. THE PERIOD WITHIN WHICH THE INFRASTRUCTURE FACILITY HAS TO BE TRANSFERRED NEEDS TO BE STIPULATED IN THE AGREEMENT BETWEEN THE UNDERTAKING AND THE GOVERNMENT CONCERNED. THE ENTERPRISE HAS TO BE OWNED BY A COM PANY REGISTERED IN INDIA OR A CONSORTIUM OF SUCH COMPANIES. THE TAX HOLIDAY WILL BE IN RESPECT OF INCOME DERIVED FROM THE USE OF THE INFRASTRUCTURE F ACILITIES DEVELOPED BY THEM. 6.3. FROM THIS CIRCULAR, IT IS CLEAR THAT THE NATUR E AND AMBIT OF THE CONCESSION SHOULD BE THAT THE BENEFIT OF DEDUCTION IS AVAILABLE TO AN ENTERPRISE WHO IS IN THE BUSINESS OF EITHER OF THE TWO, I.E. (I) BUILD, OPERATE AND TRANSFER (BOT) OR (II) BUILD, OWN, OPE RATE AND TRANSFER (BOOT). AN ANOTHER CIRCULAR HAS ALSO BEEN ISSUED O N 3 RD JANUARY-1996 - CBDT CIRCULAR NO.733 217 ITR (STATUTE) PG 8, WHEREI N IT WAS CLARIFIED THAT THE PROVISIONS OF SECTION 80IA WOULD BE APPLIC ABLE TO BUILD, OWN, LEASE AND TRANSFER (BOLT) SCHEME. FROM THE READING OF THE ORDERS OF THE REVENUE AUTHORITIES, IT IS EVIDENT THAT THIS AS PECT HAS NOT AT ALL BEEN CONSIDERED BY THEM. 6.4. AT THIS JUNCTURE, IT IS IMPORTANT TO PLACE ON RECORD THAT THESE THREE CONDITIONS OF BOT, BOOT AND BOLT ARE OUT OF THE CON DITIONS ITA NO.264, 572/ AHD/2008 AND ITA NO.950/AHD/2010 MODERN CONSTRUCTION CO. P. LT.D VS. DCIT AHMEDABAD . FOR A.YS. 2002-03 - 10 - PRESCRIBED IN SECTION 80IA(4) OF IT ACT. BUT THE S ECTION ALSO PRESCRIBES THAT THE SAME APPLIES TO ANY ENTERPRISE CARRYING ON THE BUSINESS OF DEVELOPING. MEANING THEREBY THAT AN ENTERPRISE W HICH IS DEVELOPING AN INFRASTRUCTURE FACILITY IS ALSO ENTITLED FOR 80IA(4 ) DEDUCTION. IT IS WORTH TO MENTION THAT THE SECTION HAS PRESCRIBED THE TERM OR AND NOT THE TERM AND WHILE CATEGORIZING THE THREE SITUATIONS. DU E TO THIS REASON, THE BUSINESS OF DEVELOPING ON STAND ALONE BASIS THUS ALSO QUALIFY FOR 80IA(4) DEDUCTION. AT THIS STAGE, WE MAY LIKE TO D ESCRIBE THE TERM DEVELOPER. A DEVELOPER IS A PERSON WHO UNDERTAK ES THE RESPONSIBILITY TO DEVELOP A PROJECT. A DEVELOPER IS THEREFORE NOT A CIVIL CONTRACTOR SIMPLICITOR. IF WE APPLY THE COMMERCIAL ASPECT, THEN A DEVELOPER HAS TO EXECUTE BOTH MANAGERIAL AS WELL AS FINANCIAL RESPON SIBILITY. THE ROLE OF A DEVELOPER, ACCORDING TO US, IS LARGER THAN THAT OF A CONTRACTOR. WHEN A PERSON IS ACTING AS A DEVELOPER, THEN HE IS UNDER O BLIGATION TO DESIGN THE PROJECT, IT IS AN ANOTHER ASPECT THAT SUCH DESIGN H AS TO BE APPROVED BY THE OWNER OF THE PROJECT, I.E. THE GOVERNMENT IN THE PR ESENT CASE. HE HAS NOT ONLY TO EXECUTE THE CONSTRUCTION WORK IN THE CAPACI TY OF A CONTRACTOR BUT ALSO HE IS ASSIGNED WITH THE DUTY TO DEVELOP, MAINT AIN AND OPERATE SUCH PROJECT. TO ASCERTAIN WHETHER A CIVIL CONSTRUCTION WORK IS ASSIGNED ON DEVELOPMENT BASIS OR CONTRACT BASIS CAN ONLY BE DEC IDED ON THE BASIS OF THE TERMS AND CONDITIONS OF THE AGREEMENT. ONLY ON THE BASIS OF THE TERMS AND CONDITIONS IT CAN BE ASCERTAINED ABOUT THE NATU RE OF THE CONTRACT ASSIGNED THAT WHETHER IT IS A WORK CONTRACT OR A DEVELOPMENT CONTRACT. IN A DEVELOPMENT CONTRACT RESPONSIBI LITY IS FULLY ASSIGNED TO THE DEVELOPER FOR EXECUTION AND COMPLETION OF WORK. THOUGH THE OWNERSHIP OF THE SITE OR THE OWNERSHIP OVER THE LAN D REMAINED WITH THE OWNER BUT DURING THE PERIOD OF DEVELOPMENT AGREEMEN T THE DEVELOPER ITA NO.264, 572/ AHD/2008 AND ITA NO.950/AHD/2010 MODERN CONSTRUCTION CO. P. LT.D VS. DCIT AHMEDABAD . FOR A.YS. 2002-03 - 11 - EXERCISE COMPLETE DOMAIN OVER THE LAND OR THE PROJE CT. A DEVELOPER IS NOT EXPECTED TO RAISE BILLS AT EVERY STEP OF CONSTRUCTI ON BUT HE IS EXPECTED TO CHARGE THE COST OF CONSTRUCTION PLUS MARK-UP OF HIS PROFIT FROM THE ASSIGNEE OF THE CONTRACT. A DEVELOPER IS THEREFORE EXPECTED TO ARRANGE FINANCES AND ALSO TO UNDERTAKE RISK. HE IS AUTHORI ZED TO RAISE FUNDS EITHER BY PRIVATE PLACEMENT OR BY FINANCIAL INSTITUTIONS O N THE BASIS OF THE PROJECT. THESE ASPECTS HAVE NOT BEEN EXAMINED BY T HE AO. 6.5. THE OTHER SITUATION IS AS PRESCRIBED U/S.80IA( 4) IN (II) AND (III) SUB- CLAUSES. UNDER THESE SITUATIONS, AN ENTERPRISE CAR RIES ON THE BUSINESS OF OPERATING AND MAINTAINING, OR DEVELOPING, OPERATING AND MAINTAINING ANY INFRASTRUCTURE FACILITY. AT THIS JUNCTURE, WE MAY L IKE TO MENTION THAT WHILE DEALING THIS ISSUE THE LARGER THIRD MEMBER IN THE C ASE OF B.T. PATIL & SONS BELGAUM CONSTRUCTION PVT.LTD., 126 TTJ 577 (32 DTR PG 1 OR 1 ITR 703), ONE OF US, I.E. JM IS ONE OF THE PARTY OF THE SAID JUDGEMENT AND DUE TO DISSENTING ORDERS IT WAS REFERRED FOR THIRD MEMBER, HAS CONSIDERED THE LANGUAGE OF SUB-SECTION(4) OF SECTION 80IA AND THEREUPON IT WAS NOTICED THAT THE WORD AND HAS BEEN USED BETWEEN DEVELOPS AND BEGIN TO OPERATE. THE USE OF WORD AND CLEARLY BRINGS OUT THAT BOTH THE CONDITIONS NEED TO BE CUMULATIVELY SATISFIED BY THE ELIGIBLE BUSINESS. THE LANGUAGE HAS THUS CLEARLY INDICATED THAT THE IN FRASTRUCTURE FACILITY SHOULD NOT ONLY BE DEVELOPED BUT ALSO OPERATED BY T HE ASSESSEE SO AS TO MAKE ITS INCOME QUALIFY FOR DEDUCTION. THE SECOND C ONDITION IS THAT THE DEDUCTION IS AVAILABLE FROM THE YEAR WHEN IT COMMEN CE AND THE ENTERPRISE BEGINS TO OPERATE SUCH INFRASTRUCTURE FACILITY. THU S, THE ELIGIBILITY OF DEDUCTION CANNOT BE PRIOR TO THE COMMENCEMENT OF TH E DEVELOPMENT AS ALSO THE OPERATION OF THE INFRASTRUCTURE FACILITY. ACCORDING TO US, ITA NO.264, 572/ AHD/2008 AND ITA NO.950/AHD/2010 MODERN CONSTRUCTION CO. P. LT.D VS. DCIT AHMEDABAD . FOR A.YS. 2002-03 - 12 - THEREFORE, IN A SITUATION WHERE THE AGREEMENT IS EI THER OF THE THREE, I.E. BOT, BOOT OR BOLT, THEN BOTH THE TWIN CONDITIONS AP PLY; I.E. UNLESS THE ASSESSEE REALLY DEVELOPS AND BEGINS TO OPERATE INFRASTRUCTURE FACILITY THERE IS NO QUESTION OF GRANTING ANY DEDUCTION FOR THE REASON THAT THE PERIOD OF DEDUCTION CANNOT COMMENCE UNLESS THE ENTE RPRISE DEVELOPS AND BEINGS TO OPERATE THE INFRASTRUCTURE FACILITY. 6.6. THERE IS A DISTINCTION BETWEEN DEVELOPER AND A CONTRACTOR. IN A CASE OF CIVIL CONTRACTOR, ITS DUTY IS ONLY OF CIVIL CONSTRUCTION. AFTER THE CIVIL CONSTRUCTION IS OVER, HE IS PAID FOR THE JOB OF CIVIL CONSTRUCTION AS PER THE BILLS RAISED. AT THAT POINT OF TIME, HIS C ONTRACT IS OVER AND THE AGREEMENT ENDS. AFTER THE COMPLETION AND AT THE EN D OF THE AGREEMENT, A CIVIL CONTRACTOR HANDED OVER THE SITE TO THE OWNER. A CIVIL CONTRACTOR CONSTRUCTS AS PER THE SPECIFICATIONS GIVEN. A CONTR ACTOR DO NOT INVOLVE MUCH OF HIS OWN MONEY BUT RAISES BILL OF HIS CIVIL WORK OF HIS CIVIL CONSTRUCTION WORK TIME-TO-TIME TO COLLECT THE EXPEN DITURE INCURRED. A CONTRACTOR HAS NO DOMAIN OVER THE LAND OR THE SITE. HIS ACCESS TO THE SITE IS RESTRICTED AND LIMITED FROM COMMERCIAL ANGLE. ON THE BASIS OF THE PROJECT HE CANNOT RAISE THE FUNDS FROM THE PRIVATE FINANCIAL INSTITUTIONS. THEREFORE, A CONTRACTOR IS NOT RESPONSIBLE FOR TH E DEVELOPMENT OF THE PROJECT BUT HIS RESPONSIBILITY IS LIMITED TO THE JO B-ASSIGNED TO HIM. HIS DUTIES AND RESPONSIBILITIES CAN ONLY BE EXAMINED ON THE BASIS OF THE TERMS AND CONDITIONS OF THE CONTRACT AGREEMENT. EVEN THIS ASPECT WHETHER THE ASSESSEE ACTED AS A CONTRACTOR HAS ALSO NOT BEEN EXAMINED BY THE AO. 6.7. AN ANOTHER CONTROVERSY HAS ALSO BEEN RAKED U P BY THE AO ABOUT THE OWNERSHIP OVER THE PROJECT. IN THIS CONTEXT, THE SE CTION PRESCRIBES THAT ITA NO.264, 572/ AHD/2008 AND ITA NO.950/AHD/2010 MODERN CONSTRUCTION CO. P. LT.D VS. DCIT AHMEDABAD . FOR A.YS. 2002-03 - 13 - SUCH AN ENTERPRISE IS TO BE OWNED BY A REGISTERED C OMPANY OR BY A CONSORTIUM. WE MAY LIKE TO CLARIFY THAT AS PER OUR HUMBLE UNDERSTANDING OF THIS SECTION AN ENTERPRISE IS TO BE OWNED BY A C OMPANY REGISTERED IN INDIA OR BY CONSORTIUM OF SUCH COMPANIES. AN ENTERP RISE WHICH IS CARRYING ON THE BUSINESS DEFINED IN THIS SECTION IS TO BE OWNED BY A COMPANY AND NOT THE SITE OF THE DEVELOPMENT. ACCOR DING TO US, THE AO HAS MISINTERPRETED THIS SECTION. NATURALLY, THE SI TE OF DEVELOPMENT CAN NEVER BE UNDER THE OWNERSHIP OF A DEVELOPER BUT IT IS ALWAYS UNDER THE OWNERSHIP OF A GOVERNMENT. 6.8. SO FAR WE HAVE DEFINED THE TERMS CONTRACTOR AND THE TERM DEVELOPER, ALTHOUGH SUCH DELIBERATION CANNOT BE S AID TO BE EXHAUSTIVE. AS PER OUR UNDERSTANDING, THE PROFITS AND GAINS ARE TO BE DERIVED BY AN UNDERTAKING OR AN ENTERPRISE FROM ANY BUSINESS REFE RRED TO IN SUB-SECTION (4). MEANING THEREBY AN ENTERPRISE IS TO CARRY ON THE BUSINESS OF DEVELOPMENT, OPERATING AND MAINTAINING OF AN INFRAS TRUCTURE FACILITY AND HE HAS TO CLAIM THE DEDUCTION IN RESPECT OF THE PRO FIT DERIVED FROM SUCH VENTURE. WE HAVE ALSO NOTED THAT SECTION 80IA(5) PRESCRIBES THAT FOR THE PURPOSE OF DETERMINING THE QUANTUM OF THE DEDUCTION , THE SAME IS TO BE COMPUTED AS IF SUCH ELIGIBLE BUSINESS IS THE ONLY S OURCE OF INCOME OF THE ASSESSEE. HENCE, THE ELIGIBLE BUSINESS IS TO BE SE GREGATED AS IF IT IS THE ONLY SOURCE OF INCOME. THE ENTERPRISE THUS HAS T O EARN PROFIT FORM THE PROJECT PRESCRIBED U/S.80IA(4). THIS ASPECT HAD NO T EVEN BEEN TOUCHED BY THE AUTHORITIES BELOW. WE THEREFORE DIRECT THE AO I N THE FOLLOWING MANNER. THE AO IS FIRST TO ASCERTAIN THE CHARACTER OF THIS ASSESSEE WHETHER IT FALLS UNDER THE CATEGORY OF A CONTRACTO R OR UNDER THE CATEGORY OF A DEVELOPER, IN THE LIGHT OF THE DISCUSSION MA DE HEREINABOVE. THE ITA NO.264, 572/ AHD/2008 AND ITA NO.950/AHD/2010 MODERN CONSTRUCTION CO. P. LT.D VS. DCIT AHMEDABAD . FOR A.YS. 2002-03 - 14 - SECOND STEP IS TO ASCERTAIN WHETHER THE ASSESSEE HA S CARRIED DEVELOPMENT WORK ONLY. THE THIRD STEP IS WHETHER THE ASSESSEE H AS NOT ONLY DEVELOPED BUT ALSO OPERATED AND MAINTAINED THE INFRASTRUCTURE FACILITY. AFTER ASCERTAINING THESE ASPECTS, HE IS THEN DIRECTED TO ASSESS THE PROFIT OF THE ENTERPRISE. DUE TO THESE REASONS, WE DEEM IT PROP ER TO RESTORE THIS ISSUE BACK TO THE FILE OF THE AO TO DECIDE DE NOVO IN THE LIGHT OF THE DISCUSSIONS/DIRECTIONS MADE HEREINABOVE. RESULTANT LY, GROUND NO.1 FOR AY 2002-03 RAISED BY THE REVENUE ARE HEREBY ALLOWED FOR STATISTICAL PURPOSES. 7. AS FAR AS THE APPEAL OF THE ASSESSEE IS CONCERNE D, ALL THE THREE GROUNDS REVOLVED AROUND THE ISSUE OF CLAIM OF DEDUC TION U/S.80IA OF IT ACT. THE QUESTION IS WHETHER THE INTEREST INCOME AN D THE MISCELLANEOUS RECEIPTS HAVE NEXUS OR ATTRIBUTABLE TO THE PROJECT OF THE ASSESSEE ARE YET TO BE DECIDED IN THE LIGHT OF THE DIRECTIONS GIVEN HER EINABOVE. THE ASSESSEE, IS THEREFORE, REQUIRED TO ESTABLISH THAT THE INTERE ST INCOME AND THE MISCELLANEOUS RECEIPTS ARE DERIVED BY SUCH UNDERTAK ING ENGAGED IN INFRASTRUCTURE DEVELOPMENT. DUE TO THIS REASON, ALL THE GROUNDS RAISED BY THE ASSESSEE ARE ALSO RESTORED BACK TO THE FILE OF THE AO FOR READJUDICATION AS PER LAW. C. ITA NO.950/AHD/2010 (REVENUES APPEAL) 8. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST T HE ORDER OF LEARNED CIT(A), DATED 25.11.2009 AND THE ONLY ISSUE IS THAT THE LEARNED CIT(A) HAS ERRED IN DELETING THE PENALTY LEVIED U/S. 271(1 )(C) OF RS.34,63,503/- PERTAINING TO THE ADDITION MADE U/S.80IA OF IT ACT. ITA NO.264, 572/ AHD/2008 AND ITA NO.950/AHD/2010 MODERN CONSTRUCTION CO. P. LT.D VS. DCIT AHMEDABAD . FOR A.YS. 2002-03 - 15 - 9. WHILE DELETING THE PENALTY, LEARNED CIT(A) HAS H ELD AS UNDER: 4.5 I HAVE CONSIDERED THE FACTS AND SUBMISSIONS OF THE LD. A.R CAREFULLY. IT IS I SEEN THAT THE A.O HAS LEVIED THE PENALTY IN RESPE CT OF THE AMOUNT WHICH HAS BEEN FINALLY CONFIRMED BY THE LD. CIT(A) AS REFERRE D TO ABOVE. THESE ADDITIONS PERTAINED TO DISALLOWANCE OF DEDUCTION U/S 801A OF THE ACT ON INTEREST AND OTHER INCOME AND UNACCOUNTED EXPENSES. AS REGARDS L EVY OF PENALTY IN RESPECT OF DISALLOWANCE CONFIRMED BY THE LD. CIT(A), I FIND FORCE IN THE ARGUMENT OF THE LD. A.R THAT THE LD. C1T(A) HAS ALLOWED THE DED UCTION TO THE APPELLANT U/S 80IA IN PRINCIPLE, HOWEVER, HE HAS HELD THAT SAME I S NOT ALLOWABLE IN RESPECT OF RECEIPT FROM INTEREST AND MISCELLENEOUS INCOME. FURTHER, THE A.O WHILE LEVYING THE PENALTY IN RESPECT OF THE DISALLOWANCE OUT OF DEDUCTION CLAIMED U/S 801A HAS NOT HELD THAT THE APPELLANT'S CLAIM FOR TH E SAME WAS FALSE OR FABRICATED. IT HAS ALSO NOT BEEN POINTED OUT THAT A PPELLANT DID NOT FILE COMPLETE DETAILS WITH REGARD TO CLAIM FOR DEDUCTION U/S 80IA BEFORE THE A.O. 4.6 SECTION 271(1)(C) OF THE ACT PROVIDES THAT IF T HE ASSESSING OFFICER, IN THE COURSE OF THE PROCEEDINGS UNDER THE ACT IS SATISFIE D THAT ANY PERSON HAS CONCEALED THE PARTJCULARS OF HIS INCOME OR FURNISHE D INACCURATE PARTICULARS OF SUCH INCOME, HE MAY DIRECT THAT SUCH PERSON SHALL P AY BY WAY OF PENALTY A SUM WHICH SHALL NOT BE LESS THAN BUT WHICH SHALL NO T EXCEED THREE TIMES THE AMOUNT OF TAX SOUGHT TO BE EVADED BY REASONS OF THE CONCEALMENT OF PARTICULARS OF HIS INCOME. EXPLANATION I TO SECTION STATES THAT WHERE IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF TOTAL I NCOME OF ANY PERSON UNDER THIS ACT, SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OFFERS AN EXPLANATION WHICH IS FOUND BY THE A.O. FALSE OR SUCH PERSON OFF ER AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AN D MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, THE N, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME OF SUCH PE RSON AS A RESULT THEREOF SHALL, FOR THE PURPOSES OF CLAUSE (C) OF THIS SUB-S ECTION, BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULAR S HAVE BEEN CONCEALED. THE EFFECT OF THIS EXPLANATION IS THAT IF THE NECES SARY INGREDIENTS AS STATED HEREIN ARE SATISFIED THEN THE AMOUNT DISALLOWED IN COMPUTING TOTAL INCOME SHALL FOR THE PURPOSES OF CLAUSE (C) OF THIS SECTIO N, BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CO NCEALED. THE NECESSARY ELEMENTS FOR ATTRACTING THIS EXPLANATION ARE THREE FOLD:- A) THE PERSON FAILS TO OFFER HIS EXPLANATION, OR B) HE OFFERS THE EXPLANATION WHICH IS FOUND BY THE A.O. TO BE FALSE, OR C) THE PERSON OFFERS EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATION IS BONAFIDE AN D THAT ALL THE FACTS RELATING THE SAME HAVE BEEN DISCLOSED BY HIM. 4.7 IF THE CASE FALLS IN ANY THREE OF INGREDIENTS, THEN THE DEEMING PROVISION INTO PLAY AND THE AMOUNT ADDED OR DISALLOWED IN COM PUTING THE TOTAL INCOME IS CONSIDERED AS THE INCOME IN RESPECT OF WHICH PAR TICULARS HAVE BEEN ITA NO.264, 572/ AHD/2008 AND ITA NO.950/AHD/2010 MODERN CONSTRUCTION CO. P. LT.D VS. DCIT AHMEDABAD . FOR A.YS. 2002-03 - 16 - CONCEALED FOR THE PURPOSES OF CLAUSE (C) OF SECTION 271(1) AND THE PENALTY FOLLOWS. IF THE ASSESSEE SUCCESSFULLY COMES OUT OF THE ABOVE THREE CONSEQUENTS THEN HE CANNOT BE TO HAVE CONCEALED HIS PARTICULARS OF INCOME WITH REFERENCE TO THE AMOUNT ADDED OR DISALLOWED IN COMPUTATION OF TOTAL INCOME. 4.17 THEREFORE, IN VIEW OF THE ABOVE THE PENALTY LE VIED BY THE AO IN RESPECT OF THE DISALLOWANCE OUT OF CLAIM FOR DEDUCTION U/S. 80 IA AMOUNTING TO RS.34,63,530/- CANNOT BE SUSTAINED. IN VIEW OF THIS , THE LEVY OF PENALTY ON SUCH AMOUNT IS HEREBY DELETED.. 10. HAVING HEARD THE SUBMISSION OF BOTH THE SIDES A ND CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE , WE ARE OF THE VIEW THAT THIS IS A CASE WHERE A DISALLOWANCE WAS MADE BY THE AO ON THE BASIS OF THE MATERIAL FACTS ALREADY ON RECORD AND THE SAID D ISALLOWANCE HAS BECOME A SUBJECT OF CONTROVERSY. THUS, WE ARE OF TH E CONSIDERED OPINION THAT LEARNED CIT(A) HAS RIGHTLY DELETED THE PENALTY . WE FIND NO FORCE IN THIS GROUND OF THE REVENUE; HENCE, THE SAME IS HERE BY REJECTED. 11. IN THE RESULT, QUANTUM OF APPEALS FOR A.Y. 2002 -03 FILED BY THE REVENUE AND THE ASSESSEE ARE PARTLY ALLOWED THAT TO O FOR STATISTICAL PURPOSE, HOWEVER, THE PENALTY APPEAL FOR A.Y. 2002- 03 FILED BY THE REVENUE IS HEREBY DISMISSED. SD/- SD/- (N.S. SAINI) (MUKUL KR. SHRAWAT) ACCOUNTANT MEMBER JUD ICIAL MEMBER AHMEDABAD; DATED 29/11/2013 PRABHAT KR. KESARWANI, SR. P.S. TRUE COPY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)-III, AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD ITA NO.264, 572/ AHD/2008 AND ITA NO.950/AHD/2010 MODERN CONSTRUCTION CO. P. LT.D VS. DCIT AHMEDABAD . FOR A.YS. 2002-03 - 17 - 6. / GUARD FILE. / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD